Can we afford this house ?

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Miamilaw35
Posts: 3
Joined: Mon Apr 15, 2019 6:35 pm

Can we afford this house ?

Post by Miamilaw35 » Mon Apr 15, 2019 6:53 pm

Hi all. I'm a new boglehead forum member, but have been adhering to boglehead philosophy for a few years now. My wife and I are not in agreement as to how much house we can afford. We live in Broward county Fl, and house prices here are soaring. She wants to buy a big house so our family can stay over often, I want something more modest so we have more available to invest.

Me: 35
DW: 36
3 year old daughter (planning on 1 more)

Income myself: $2500 take home every 2 weeks
DW: $750 every 2 weeks take home
side business: $1000 every 2 weeks take home on average

Balance sheet:
Cash for down payment: $55k
Savings account: $15k
TSP: $122k (started maxing out contributions this year)
(federal pension at 50 yrs old also)
Debts: None other than $440 car lease (ending April 2020......bad decision never again)
child care: $350 (wife is preschool teacher, get significant discount for child care)

Now, wife wants to buy a house in the $480-$530k range ($3300 monthly payment) 4 beds, 2500 sq, and a pool doesn't come cheap in South Florida broward county.

I personally want something a tad smaller, 2000 sq ft around $400k or less. ($2700 payment).

What does everyone think ? Can I afford $500k ?

Sam1
Posts: 290
Joined: Mon Apr 09, 2018 7:24 am

Re: Can we afford this house ?

Post by Sam1 » Mon Apr 15, 2019 7:14 pm

No. Your house would be roughly 5x your TSP

Keep saving

JGoneRiding
Posts: 1566
Joined: Tue Jul 15, 2014 3:26 pm

Re: Can we afford this house ?

Post by JGoneRiding » Mon Apr 15, 2019 7:20 pm

Also no. The 400k house is actually a tight stretch at about 3x income more than that and you will be house poor for sure.

tampaite
Posts: 512
Joined: Wed Feb 18, 2015 9:29 pm

Re: Can we afford this house ?

Post by tampaite » Mon Apr 15, 2019 8:14 pm

Miamilaw35 wrote:
Mon Apr 15, 2019 6:53 pm


Income myself: $2500 take home every 2 weeks
DW: $750 every 2 weeks take home
side business: $1000 every 2 weeks take home on average

Now, wife wants to buy a house in the $480-$530k range ($3300 monthly payment) 4 beds, 2500 sq, and a pool doesn't come cheap in South Florida broward county.

I personally want something a tad smaller, 2000 sq ft around $400k or less. ($2700 payment).
Maybe. What is your monthly rent currently?

If it's 2500 then, Yes
If it's 1500 then, No

Topic Author
Miamilaw35
Posts: 3
Joined: Mon Apr 15, 2019 6:35 pm

Re: Can we afford this house ?

Post by Miamilaw35 » Mon Apr 15, 2019 8:20 pm

Monthly Rent is currently $1900

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Nate79
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Location: Delaware

Re: Can we afford this house ?

Post by Nate79 » Mon Apr 15, 2019 8:44 pm

Nope. And it's not even close.

Rus In Urbe
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Re: Can we afford this house ?

Post by Rus In Urbe » Mon Apr 15, 2019 8:57 pm

I agree with others that this house will put you in a very financially insecure position. It would be far to risky for me to consider.

It's so very difficult to not fall for the Siren call of the "big beautiful house." Try to find something that is a bargain (an up-and-coming area, or something that needs fixing up, or a buyer in distress and eager to sell). They can be found if you keep looking. You will not be sorry if you find something that feels like such a steal.

In the past 22 years, my DH and I purchased two homes. The first was an apartment in Manhattan---and it was "less than we could afford" (said the real estate agent) and so we paid for it in cash; turned out great for us when we later sold it. The second was an upstate home that we bought because it was so close to my office I can walk to work (saving tons of time and money, and allowing us to go down to one car); the house needed a lot of work, as did the yard and garden, so we were able to negotiate the price way down. The real estate agent thought we were nuts to buy it. But now, 16 years later, we are still in this house which we have gradually and steadily fixed and we love it.

Location matters. Most of our friends have much larger, fancier houses but none are as lovely as what we have made of ours. When you are considering a house, think long-term (location, School district, garden space if you care about that, as well as good bones of a foundation, and layout) and don't get turned off by easily fixable cosmetic problems (bad paint jobs) or seduced by the staging and the "fancy finishes" (granite countertops) that you can always put in later if you want them.

We've greatly benefitted by buying "less than we can afford" and not joining the crowds of the house poor, of which there are millions and millions.

Good luck to you!
I'd like to live as a poor man with lots of money. ~Pablo Picasso

Thegame14
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Joined: Mon May 07, 2018 11:53 am

Re: Can we afford this house ?

Post by Thegame14 » Mon Apr 15, 2019 10:38 pm

so you combined income including side business which no idea how stable that is and how sustainable it is after kids, is $110K, so you can afford a mortgage of around $330K, so add your $55K for downpayment and you can afford about $385K for a house.

SoonerD
Posts: 194
Joined: Tue Jul 21, 2015 8:28 pm

Re: Can we afford this house ?

Post by SoonerD » Mon Apr 15, 2019 11:53 pm

Miamilaw35 wrote:
Mon Apr 15, 2019 6:53 pm
Hi all. I'm a new boglehead forum member, but have been adhering to boglehead philosophy for a few years now. My wife and I are not in agreement as to how much house we can afford. We live in Broward county Fl, and house prices here are soaring. She wants to buy a big house so our family can stay over often, I want something more modest so we have more available to invest.

Me: 35
DW: 36
3 year old daughter (planning on 1 more)

Income myself: $2500 take home every 2 weeks
DW: $750 every 2 weeks take home
side business: $1000 every 2 weeks take home on average

Balance sheet:
Cash for down payment: $55k
Savings account: $15k
TSP: $122k (started maxing out contributions this year)
(federal pension at 50 yrs old also)
Debts: None other than $440 car lease (ending April 2020......bad decision never again)
child care: $350 (wife is preschool teacher, get significant discount for child care)

Now, wife wants to buy a house in the $480-$530k range ($3300 monthly payment) 4 beds, 2500 sq, and a pool doesn't come cheap in South Florida broward county.

I personally want something a tad smaller, 2000 sq ft around $400k or less. ($2700 payment).

What does everyone think ? Can I afford $500k ?
Identifying your take-home pay but not your gross pay leaves me unclear on what you make. Take-home pay is supposed to be calculated as [gross - payroll taxes - fed & state taxes at a rate that provides no balance due at tax return time]

at $3250 take home (I don't count side business income as most of those seem unreliable and are often of duration less than 30 yr mortgage) with 28% for PITI gives about $2,000/mo. You can't afford either home choice!

If I were in your shoes I would tell my wife I will put in $2,000/mo for PITI on 15 year mortgage; any larger payment must come from her wages. Note I said 15yr not 30yr as most seem to be in love with huge debt that takes nearly entire working lifetime to payoff - that's quintessential American consumerism and entirely unhealthy in terms of financial impact, stress impact and risky behavior.

I'm sure you'll ignore it as it's the American standard to take on huge debt spanning 3/4 of working lifetime and think nothing of it.

God Speed to you and your family!

WaffleCone
Posts: 107
Joined: Fri Oct 23, 2015 11:48 pm

Re: Can we afford this house ?

Post by WaffleCone » Tue Apr 16, 2019 12:45 am

Nothing wrong with a 30-year mortgage. I have young kids and understand the desire to get a nice family home now and pay it off over the long haul. It's not evil American consumerism. You just need to make sure you get something you CAN afford.

I agree with all the others that $2700/month is WAY TOO MUCH. $2000 PITI included should be a hard limit, a few hundred less if you can swing it. Kids don't get less expensive as they get older and you're planning an additional one.

jharkin
Posts: 2145
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: Can we afford this house ?

Post by jharkin » Tue Apr 16, 2019 7:15 am

Agreed with the members above - not even close.
I wont count the side income, salary works out to 85k per year take home on the numbers you provided, so I assume its 100-120k gross. On those numbers you should be looking at 300k or less house. Maybe 350 tops. And that's assuming waiting until you can scrape together the 80k or so you need for a true 20% dwnpayment, closing costs and movers (and you want reserves as well, so make it closer to 100k cash on hand). If you use what you have and only put down 10% Id try and be well under 300k.

If you stretch to buy 500k and either get laid off, loose the side income, or somebody gets seriously ill, you WILL loose the house to foreclosure and probably wreck your credit for decades. Not worth the risk.

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FlyAF
Posts: 321
Joined: Tue Jan 23, 2018 11:14 am

Re: Can we afford this house ?

Post by FlyAF » Tue Apr 16, 2019 7:19 am

Your wife is out of touch with your financial situation at this point in your life.

stoptothink
Posts: 5248
Joined: Fri Dec 31, 2010 9:53 am

Re: Can we afford this house ?

Post by stoptothink » Tue Apr 16, 2019 9:24 am

FlyAF wrote:
Tue Apr 16, 2019 7:19 am
Your wife is out of touch with your financial situation at this point in your life.
Yep. Similar age (38 and 33), about twice the income and several times the savings, and we wouldn't even look at a home in OP's wife's suggested price range (we are in a similar COL area). Unfortunately, this is the reality for most people. This sounds eerily like most of my former neighbors who moved away the last few years to "upgrade".

dbapaddy
Posts: 60
Joined: Tue Aug 14, 2018 1:52 pm

Re: Can we afford this house ?

Post by dbapaddy » Tue Apr 16, 2019 9:37 am

You do not need a pool. Move to a community with a community pool if you must.

Never buy a house for future visitors unless somehow it will save you $$. Suggest a blowup mattress or point them to the nearest hotel.

KlangFool
Posts: 12297
Joined: Sat Oct 11, 2008 12:35 pm

Re: Can we afford this house ?

Post by KlangFool » Tue Apr 16, 2019 9:41 am

WaffleCone wrote:
Tue Apr 16, 2019 12:45 am

Nothing wrong with a 30-year mortgage.
WaffleCone,

There are two separate things here:

1) Deciding whether to buy a house based on a 15-year mortgage.

2) Actually buying a house on a 30-year mortgage.

They are separate from each other. They are both good ideas.

KlangFool

destinationnc
Posts: 81
Joined: Wed May 23, 2012 9:57 am

Re: Can we afford this house ?

Post by destinationnc » Tue Apr 16, 2019 9:43 am

Sorry but no. You should be looking around a max of $360k. You need to either lower expectations or make more money. You will be stressed out carrying that amount of debt against your income.

Ybsybs
Posts: 471
Joined: Thu Aug 28, 2014 4:28 pm

Re: Can we afford this house ?

Post by Ybsybs » Tue Apr 16, 2019 10:00 am

Another reason to get a less expensive house is that you are likely to be happiest at a within your means spending level if you are surrounded by others with a similar or less pricy lifestyle. With the big house, you can't count on your neighbors being house poor too.

megabad
Posts: 1356
Joined: Fri Jun 01, 2018 4:00 pm

Re: Can we afford this house ?

Post by megabad » Tue Apr 16, 2019 10:22 am

Miamilaw35 wrote:
Mon Apr 15, 2019 6:53 pm
What does everyone think ? Can I afford $500k ?
Just for reference. Some banks will not approve you for a 10%/90% LTV loan for 500k with your current income. I don't want to say there are none, but it would be a stretch for many lenders. You might need to stay under Jumbo limit. Perhaps let the lender help make the case for a lower budget with the spouse?

elderwise
Posts: 139
Joined: Fri Jul 22, 2016 10:27 am

Re: Can we afford this house ?

Post by elderwise » Tue Apr 16, 2019 11:24 am

I think we need to know what is the gross income combined both make?

adding in back taxes i got around 97K they make?? if thats right perhaps its doable?? a bit of a stretch tho still..

BuckyBadger
Posts: 892
Joined: Tue Nov 01, 2011 11:28 am

Re: Can we afford this house ?

Post by BuckyBadger » Tue Apr 16, 2019 2:37 pm

In my opinion you can't afford either house.

But it is a bit confusing with "take home" being the only income specified. What is your total gross income monthly or yearly?

Topic Author
Miamilaw35
Posts: 3
Joined: Mon Apr 15, 2019 6:35 pm

Re: Can we afford this house ?

Post by Miamilaw35 » Tue Apr 16, 2019 3:53 pm

Considering I live in a no income tax state, I figured it was easier to show take home income. But for those that ask, here is pre-tax income

Total income for myself: $107k
Total income for wife: $25k
total side business income total from tax year 2018....expecting similar result in 2019: $38k

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